Toyota looks to supplier innovation to build on global success

In 2018, influential automotive consultancy Planning Perspectives confirmed again the importance of a strong relationship with suppliers and its positive impact on both side bottom-lines.

The importance of supplier relationships is not news to Toyota. We have long focused on supplier relationships to boost our performance, and the hard work has paid off. For 10 years, Toyota has been named the top original equipment manufacturer by suppliers in Planning Perspective’s industry survey in the US. Our philosophy applies globally and we also behave in the same way in Europe.

Our suppliers play a huge role in determining our performance and our costs. But even though our approach to managing relationships has been successful, it must adapt to meet the challenges the industry faces in the coming years.

Like all automotive manufacturers, Toyota is looking to succeed in a transforming industry. Not only do we have to shift to electrified vehicles to play our role in a low-carbon economy, we also need to build connected cars, develop mobility as a service, and adopt increasing automation.

Toyota is already leading in these areas. In Japan, the Toyota Motor Corporation has launched a Mobility Services Platform (MSPF), a cloud-based digital ecosystem that provides the tools necessary to bring to market mobility services including ride sharing, car sharing and remote delivery. Meanwhile, Toyota Connected works with telematics, big data and mobility services in partnership with companies such as Avis Budget Group and Uber.

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New challenges in automotive and supplier relationships

But to continue to make progress in these areas, we need to work with some suppliers in new ways. Not only will automotive firms buy goods and services from technology suppliers, they will also become providers of data which could become part of services involved with navigation, fuel saving, maintenance, insurance and so on. It fundamentally shifts the relationship between these suppliers and OEMs. These companies will not simply be suppliers, but partners in the way we both serve customers.

We are looking to technology firms to help us in this transition, as a host of in-car services becomes possible as mobile internet is boosted by 5G mobile data. To ensure success, we need to work with technology companies very differently to the way we do with incumbent suppliers.

Success stories with supplier innovation

But it’s tough to work in new ways because we’ve had years of success built on a deep working relationship with existing suppliers. Our work with them is almost intrusive – in a good way. We are in their factories nearly every day. We support the development of their manufacturing processes and if there’s a problem. If a supplier has a crisis, we often help. We also make sure that, after deep negotiations, we sustain our word and pay our partners on-time. Late payments is not an option for us.

In return, we need our supplier to focus on cost, quality, delivery and innovation. Over the last 20 years, we have helped suppliers become more involved with projects. The latitude for them to work on our generic specifications and functions, rather than on a given drawing, offer them opportunity to bring in innovation resulting from their R&D They take responsibility for innovation and, although our profitability remains high, the supplier is capturing more value by working closely with us.

The approach we have adopted helps us make advances in powertrains such as hybrid, electric and hydrogen-powered cars; In contrast, in the field of connectivity and digitalisation, we need to stretch ourselves to also open our doors to disruptors and non-automotive players. This is a major challenge for us to onboard those new type of partners. Many of them are a different size, work to different timescale, and have a different mindset to our automotive partners. It’s a very good stimuli for us to adapt our ways of working. 

New approaches to onboarding small innovative suppliers

As said, our onboarding process is a challenge for the smallest partners. Even though we need them to guarantee efficient and top quality product development, both our terms and conditions, as well as our concrete requests during development, can be perceived as intimidating and for start-ups and small companies. We need to work to make that on boarding easier and change our mind set to build relationships that create trust more rapidly. We need to understand that mutual trust developed through historical partnership cannot be given overnight to companies we don’t know. We need to speed up the pace at which we build trust with partners.

Over the next decades, we’re going to see the way people travel transformed. The automotive industry needs to lead this transformation or risk being side-lined. While Toyota has become a world leader in supplier relationships in our industry – and these relationships have boosted our innovation – the techniques we have built in the past will not be enough to maintain our position in the future. By finding new ways of working with our smallest suppliers and high-tech start-ups, we can ensure our history of world-leading innovation continues long into the future.

SRM has helped propel Toyota on its journey to become the world’s largest automotive manufacturer. But to meet the challenges in the next leap forward in mobility, the company is striving to accelerate innovation with new sets of suppliers, says Toyota Motor Europe purchasing director Jean-Christophe Deville.  

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